Outsourcing the Arsenal of Democracy?

When Adam Smith wrote “The Wealth of Nations” in the mid-eighteenth century, expounding the theory of free trade, he lived in a world so in love with free trade’s opposite ideologies, mercantilism and protectionism, that he believed free trade would never exist in a pure form. “To expect, indeed, that freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it,” he wrote.

Free trade was, therefore, something of an abstract ideal to its father — a philosophical asymptote that could be approached but never reached. And it remained so to all the world’s major nations for over two centuries. It is interesting to speculate how much of the appeal of “free trade” as a philosophical absolute lay in the fact that it would never be given a chance to work as an absolute. The world’s natural political tendency was to err on the side of too little freedom of trade. An economic pathologist could, therefore, confidently recommend increased freedom of trade in nearly any time or place, secure in the knowledge that, like a Doctor recommending better diet and exercise, it was a prescription unlikely to be overdone by his patients.

Until today, that is. Today, the economies of the world (or “economy,” I should say) are under the direction of anorexics seeking an eternal runner’s high. For the first time, the pathologies of excess free trade are becoming a worry.

For those nations in which labor is expensive, one of these pathologies is the possibility of losing so much domestic manufacturing capacity that the nation cannot defend itself in a sustained war — when the normal rules of self-interest and economics are all made inoperative. According to the current purist incarnation of free trade theory, it would be perfectly acceptable for America to lose all of its domestic garment industry to outsourcing and overseas competition. Indeed, it would be a good thing, producing very real benefits for Americans in the form of cheap garments and an increased standard of living. Likewise, it would be a theoretical benefit if 100% of our farm implements were to made more cheaply in a foreign plant, or 100% of our cars, or soap, or motor fuels, or pots and pans. If someone wants to provide our every need quite cheaply, what’s not to like?

This vision of economics as the supreme judge of long-term national interest does not, however, take into account that in a war, we are unlikely to have the co-operation of (or even simple access to) the overseas factories that crank out the mundane items of civilian commerce today. We will not have jeans factories that can suddenly make uniforms. Our farm implement manufacturers cannot be counted on to begin making tanks. Our soap manufacturers cannot be tapped for explosives production; our motor fuels sources cannot be diverted to war use; and the factories that make pots and pans cannot make canteens and bedpans — because many of “our” factories are located in foreign nations, staffed by foreign citizens, and they could — quite possibly — be busy making supplies for our enemies in some future war.

Although the United States makes some effort to maintain a high tech manufacturing base, as well as some specialized military manufacturing capacity capable of providing our tiny peacetime defense needs (and this is worth doing), what really matters in a war is having the capacity to rapidly convert a substantial civilian manufacturing capability to military use. America can make the best military equipment on Earth right now, but how much of it could we make in some future large conventional war?

America should be especially attuned to this possibility, since manufacturing is how we won World War II so decisively. More than strategy, or righteousness, or bravery, or sacrifice, we won with factories. And they were not weapons factories. They were mundane manufactories of boring household goods: sewing machines, plumbing pipe, furniture, pleasure boats, automobiles, tractors, hosiery, toys, toothpaste — you name it. At the outbreak of war, they were then converted to make everything from rifles to oilcans to parachutes and cleaning kits.

Our boring factories provided our every need, and much of our allies’ needs as well. We became the celebrated “Arsenal of Democracy.” The Axis was drowned under our converted manufacturing capacity. American citizens worked overtime and applied decades of experience to the wartime conversion. Patriotism and creativity was unleashed from the design bureaus through to the factory floors. Were we to need to do this today, could we make even a shadow of the effort we had in World War II?

Trade creates not just commodities and goods, but capacities and knowledge as well. These latter two items do not seem to figure prominently in any of the calculations of net good that are made regarding instant free trade with low wage nations. In a world in which all labor is an interchangeable commodity, the patriotic orientation of the laborers is not considered important. This is an oversight that might become painfully obvious to us one day, when we find that a factory that makes cheap plastic toys can also make cheap plastic mines — but who these mines are made for will not be determined by open bid.

War is a constant of human behavior. America will be involved in another major war one day — a fairly easy possibility to imagine currently. Iran’s population will surpass that of Russia within a generation. China is a nascent superpower very open about her ambitions in Asia. North Korea can field an army of millions tonight. A militaristic neo-Marxism grows in Latin America. The number of nuclear nations increases as never before — eliminating the unilateral nuclear option America has long had as a panic button in the event of a worst-case conventional war.

If America had to fight — really fight under a military draft with millions of men in a sustained war against a constellation of united enemies — with what would we fight? There are many benefits to free trade. But we need to admit also that free trade, like all other philosophies, breaks down at the extremes and carries with it costs that cannot be readily determined by the short term self-interest of a business transaction. In the end, every nation needs to reserve to itself certain minimum capabilities as a form of insurance, and all nations need to remember that there are moments when the loyalties in a man’s heart are worth far more than any economic enticement. In war, there is no global labor market.